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5/24/2012 8:30AM

Facebook IPO: Favoritism On Wall Street?

Ryan Dezember joins Rolfe Winkler and David Weidner to discuss how underwriters have profited from Facebook's IPO mess, and Joe Barrett looks at the trouble United and Continental have faced in merging the two airlines. Photo: Reuters.

This transcript has been automatically generated and may not be 100% accurate.

... the the ... Wall Street analysts got more information about Facebook ... than some small investors to small investors and get the shaft will discuss ... the Egyptian President selections going smoother in its second day than some people and anticipated ... and well the one percent are happy flying United and Continental and that may be bad for business good morning I'm Ralf Winkler welcome to the New Saab join today by MarketWatch columnist David Weidner Leroy David A gunman ... were to jump right in ... with on Facebook we got Ryan Dezember here I in the morning morning and ... so ... small investors are complaining that effectively ... the boys got an advantage in Facebook's IPO than seventy loss because we now know ... in fact that Facebook was on the phone with Wall Street analysts telling them ... hey guys ... it doesn't look as good as we thought it did a couple weeks ago ... and it's a donor numbers yet mean is this an example of the small but losing the war ... David Selby dry and witty as they ... well you know in my ... if the markets today argue that to you know a lot of good numbers that the sinuous used to make their calls for public was public information and only ... because the company reported their first-quarter ... results that show over abusive or down profits were down ... the momentum was slowing ... and I you know do you need ... Cheniere Wall Street firms to tell you that houses on fire when you can see the flames and smoke ... of buy or sell ... that that's that's the word humor Brian meanwhile ... Wall Street ... Morgan Stanley in particular may be ... a fair my money on this on this offering you explain ... the details really kind of the plumbing of how there's this overallotment right Canada selling extra shares and invites him back to lower priced ... right yet so they they got I think of the four hundred and eighty four million shares under the market ... aam and they bought four hundred twenty one giving them make him for about sixty three million ... and they use that kind of stabilizing the first days on ... no buying shares of the market by just that effectively to reducing cover I work that they had created and creating a floor where they would kind of suck out the the people were nervous and selling in a price cut a ... deal to price ... above the issue of thirty dollars ... and then you know come Monday were told ... that they went back into the market started buying in a lower price ... of basically leaving that you know safety by thirty two ... weaving six dollars and pocket for every share right so in your neck short at thirty eight I guess when you're buying back shares below thirty eight ... then you're obviously making the spread so that worked out for Morgan Stanley I guess it that's it that's what I'm understanding the idea of our source tells there than in the other underwriters are in line to get about a hundred million dollars ... profit which is you know that ... everything's magnified Nisbett because of the science um it's not unusual the the the over allotment is the isthe is in almost every IPO ... but in this case you know everything's magnified by the size ... I think that's the point and we think we need to make a distinction that ... there were talking about the information that was given to him was that the separate issue from ... of the decision to honor all or or Morgan Stanley and underwear are stepping in to support the stock short which is which is a common practice from a stock that is struggling in an IPO doesn't happen that often when stocks are ... the over allotment Act that fear is that if they are going to in this in in in line to Turkey was in that you know the reason that we're talking about this enormous number of hundred million dollars of trick or what Morgan Stanley do to make an extra hundred million dollars on this one simply because the size of its IPO was so cute to ... fifteen sixties leaking of standard IPO practice that's another thing that's coming out ... with respect the first part of our discussion Wall Street analysts ... are part of the IPO process there talking to management and necessarily sharing a research ... with the wider world of course ... that's normal right ... don't get it going so in the case to be in this case when you have a an example of ... I guess those will still sticking on their numbers ... I mean should ... do to smaller investors ... relieved Apple complained that it's unfair that state cadre and Fidelity these guys knew ... well ... hated the numbers are coming down we're not can abide branch a staff of thirty eight I think that theirs is a specific ... it is hard to approve the second think that if there was a specific decision ... on the part of the underwriters in there and wants ... to ... give specific information give a warning to large investors ... up ... just in the hours before this IPO as opposed to ... regular investors were about the body and without this information ... I think that the underwriters do have a fiduciary duty to all investors in a Laverne to be poignant ... and so I think that or is the potential for ... um you know going back and saying he did something wrong here and you need to make it work ... potentially more regulation Teddy who knows if we'll see more regulation now it's it's artists a highly regulated process IPO underwriting ... and let's get a quick check of Facebook's chart ... here I think it's up ... yes and in premarket trading ... and ... while we got in we actually in Australia Australia there's a bookmaker that saying ... you know and ... it's going and above thirty dollars for leading the fight going on so I guess I'm not ... not a betting man but I guess that means he can be ... wiped and ten for ten dollars for two dollars that ... any get your levers there's a lot better than if you're not you're buying a stock your ... thirty two ... in Europe or so that the stock market is the isthe best odds making ... I like doing the math right workout out there and some people are paying thirty two dollars a share for right now or thirty three ... and that's really think it's gonna be I mean that's that's for the interested so ... five to one odds and maybe take ... great ... pride thank you so much for joining us thank you and come or not Egypt Election is going slower than people expected ... now for a check of the markets we have Dow Jones John Shipman year John Howard took this morning markets will get a little bit higher Europe's rebounding from some sharp declines yesterday ... euro is all off its earlier lows but basically is only twenty two month low against the dollar ... so those slightly better tone and Europe is the ... isthe is this helping U S stocks a little bit ... so we'll get on to modest modestly higher open may be flat but ... make any any rally in this environment is can ... this get the challenge ... seasoning jobless claims also came in ... this was flat ... as expected it because they were with last week's were revised slightly higher so were were down the shopping around at three hundred and seventy thousand level ... um for initial claims ... and a durable goods orders came in a little bit better than expected but again that's sort of Clichy ... indicator a lot of time depends on your aircraft orders that were and ... so was modestly better but I don't think the YouTube ... piece of data and jobless claims are the durables really have much impact and stock market today it's still all the euro ... the driving trading today is the committee about Europe again this is gonna be about ... on on Tuesday that it seems that these numbers that came in below the pre much I think she's you were to watch him and that that they're not really ... been a really strong in either direction to ... move the needle precisely I think the focus is going to stay squarely on yer update we have this EU summit last night again nothing ever seems to come under the sun it says alot of talking and ... disagreement here and there and had no real solutions that scale we saw ... last night ... um so ... you know to continue to watch the direction of the euro ... still support there is for that stocks have ... keyed off of that move in a lot um over last year or so ... to billion in intraday trading ... and I'm so that's gonna really really call the shots we have a couple of corporate earnings better this morning to the ... parade Tiffany's aam ... Ford's outlook for the year or so ill that HP a course in each page it has details on the job cuts but I guess ... the quarterly guidance warnings ... maybe some people it's an expected so it's it's bouncing off ... exactly a multi year lows announced in the third of the Treaty of HP the ... Dow component will that little bit of ... a path to the tothe index an offset any sort of decline but ... um you know the focus still remains ... the ... contortions that ... Europe's going through right now ... yet we don't really have any good news necessarily tidbits it did just bouncing off right and the jumble of words the issue really is a good apple ... slaw rolling crisis in Europe and the of the U S will write and preparing for Greece to exit this point I pretty much the actually city on doesn't go out on that sneak in some cases they were they actually had a good day ... to another amazing Greece anime exiting the euro writer and there's good so city is the engine for persons twenty thirty so we know we have a few months le ... but so that ... that Tom ... the situation the news that the plot along with him again as the ubiquitous get you wanna try to be the kind of thing that ... you know a big run precipitate said ... closing of the banking system which precipitate ... pretty drop mind turning around all in like a two-week period that nobody's prepared for ... this is me that that that is my dad and and and we will have a date for Spain and Italy that was ... interesting to me ... I don't think they have a ... oily Avalon U S market that privilege has ... a DVD entitled to concentrate anything from more than about ten minutes ... and so if the ... sentiment flights in and out of the aisle what what's going on in Europe trade ... today it's kind of ... and in the middle right now ... great ... thanks so much junk sure Bush or John Shipman always on Dow Jones fourth best ... and when the one percent rise twenty five percent a year revenue it's not good if they're unhappy that's next ... why one percent of your flyers strive twenty five percent of your revenue it's not good when they're unhappy Joe Barrett joins us from Chicago I think it is ... like to talk about the merger process going on with United and Continental and it's not going great job ... well ... what's there to tell us about much there what happened what went wrong ... with that that that they fit into it ... combine all of their computer systems their web site ... the frequent flier programs of the reservation system ... state the president ... instead of doing open heart surgery five time they decided to do it all in one ... and really how they were pretty excited that place over the web I came up to a were very ... good ... but that that that that turned out that they felt that the problem with their frequent fliers ... reservation of people ... you don't ... normally Tuesday thing unaware they had to call in and the wait time either went crazy because there were so many people have improbable one ... and you know what the what the the the upshot is that ... they have ... entered a bunch of people who are real did their best and most important customers who are you beginning to like ... you know ... first here's service all the sudden having spent time on the phone and then the dentist getting really angry and you're wondering whether ... they really wanna stick with United ... job is actually a fastening statistical in your story which is on page one of today's Journal ... that ... of about one percent ... of frequent flyers can sometimes drive up to twenty five percent ... of the airline's revenue ... yes really I really interesting I mean you know anybody who why and I think they're the most important customer out there but I'm ... you know a lot of people like me who ... don't travel with family or get occasionally for business ... you really kind of work to lament the lack of a plane hit the apps that the people who really matter to the airline for these the people who are flying all the time and ... are willing to pay full price and in particular frustrated because France is they're not getting the crazy ones ... he sat there waiting on hold longer ... yet now would ... it ... be noted that neither trying time for for the people are used to getting to like about the best possible service spending hours on the phone ... trying to do in a relatively simple thing to think that they could've done in ... the five minute before taking two hours or even knew no multiple phone calls ... each about ... an hour or so ... the airline that that you know they they they work their way through most of these problems but the question of ... how many people they lost while the ... fall to worst this was going on ... and that's that's my question about this ... there doesn't seem to be tried and true approach to making these the airline mergers work because some people can choose to do the open heart surgery five times ... and some people choose to read that the Indian open heart surgery like a single bypass ... Lenovo bypass exactly ... and it is too soon to say which one is the better route that this point I mean ... obviously that you're going to get a lot of complaints the with this you know the way that United Continental worked on this ... up of May has proved to be the way to do it down the road I mean are we seeing some of those complaints tail off ... yes the hell up now ... and in other words it seems to be over ... and you know it if it's true it is paying for a map that we complicated and and you know really a year from now or two years from now ... when you look back and and then analyze the data may be what the right approach but ... in that effort in the meantime ... that ... that awful lot of that that is the double if you are United or a Continental frequent flier ... and you're you're you're among the leading the league ... guys like American beauty what your business are they trying to to ... poach customers ... Yeh that's really what interesting thing ... about it because ... they know me ... you know at that United in and out now ... that there are ... frequent fliers tribunal riled up because they went from being one of four hundred thousand or six hundred thousand to be one of million ... the table so you know ... Ryles people in other other carriers because if you ... are one of the police that if the Flyers you can help somebody else to take a look at that that that that you know my airline ... to switch over Europe and then end up there and took seventy people ... that American trip acquired heard about that and they got angry so ... that that ... that that they guide you there was a big moment when the warm up for grabs meanwhile there may be another chance that it is kind of merger process if in fact ... I guess its American and US Air ... might theoretically be the next aisle ... anyway Joe thank you very much for a very inching report today on page one of the Wall Street Journal ... the team to the terms of on ... my pants and the contents of the stats I ... the ... we could see his you ... know we we find a ... new life in music ... Acme be happy to contain a path to healing agent ... and and and that got me a lot ... platinum was that ... it is an increase ... I love this team ... she proud of this car but to advocate for most of ... AMR was ... because the published on wood shop ... but we get Charles Levinson on the ground in Cairo doing double duty as a camera man and is a reporter and that's and that's a great sound trials ... tell us we're entering our second day ... of elections in Egypt in the first round and it's actually going smoother than some people expected ... first up are no ... free her Democratic ... election for president in Egypt and it sort of punctuate ... for the the ... what what are the critical step in the ... same vision and the uprising your half ago ... the transition has been ... seeking re rocky there's been no offer to buy one ... of the political turmoil and economic to know to create an economy rising crime ... um you know though that the weeks leading up to election bubble after the disqualification of candidates ... the military they were skeptical about whether the military what drew me ... to relinquish our ... town ... and so that would allow the concern there that maybe ... you know you know ... about the collection and remarkably when did you know we're approaching the end of the first round ... and ... Dom you know quite simply that you don't ... even know ... that they should consider going well intentioned remarkable to the through the historic ... historic moment we're not just the tip of ... the Middle East Google appears to be leading Charleston Etihad in second ... would we really have any reliable in either due to the polls leading up to the election were were were all over the place pretty under no unreliable pulling at the new architecture ... aam ... and and you know that the conventional wisdom has been that that the former foreign minister on rumors that has been ... in one of the leading contenders ... of the Muslim Brotherhood Baltimore Steve Ridgway seemed like he was an underdog but now ... appears ... give thanks to the strong political issue to the Muslim Brotherhood that the of the contenders well ... um but again it's it's it's really a four person even perhaps a five person contest ... that ... he is really too close to call ... on at this point um ... will we should know more about why did he think that has the individual campaigns were the result of their taxable ... the video of ... the farmer says ... he voted for his candy because all the rules for worse the so the likes of business and the impact in the Western elections ... um I'm just wondering you know what is what we're seeing in Egypt ... it just kind of review for forty eight hours without having to watch and are excited that the process is happening ... but they are going there to the moon is the return ... of when they realize that others can it be that bad ... there's going to be a runoff that there's no clear winner of that to ... you know ... one faction ... didn't win um what what what's going to be the fallout from this down the road is is is that in the good feelings in charge of about twenty seconds here ... I think I think what I can do it again ... I know where to apply inauguration to broad awareness that the process to count ... um ... at what I had much of the more than the result of course there are some candidates who would be politically polarized and you know if it's hard to protect us a lot like ... two former regime in Iraq which people are when ... you know it's possible that he could trigger new new new coach are ... great but I don't ... but ... I think you are optimistic for a ... thank you so much wrong Levinson on the ground in Cairo ... they David Weidner for joining me ... results are out today the Egyptian Election and more of the beest